In the first six months of last year, the bank in Latvia operated with EUR 59 million in profit.
The bank points out that income was lower in the first half of the year but recoveries higher. Meanwhile, expenses decreased due to continuous focus on efficiency.
Lending volumes have remained unchanged compared with the beginning of the year, but increased by one% in the second quarter compared to the first quarter, mostly supported by increased credit demand in the light of stable macroeconomic conditions. The bank points out that a positive trend was seen in corporate lending, leasing and consumer finance during the second quarter of the year. New lending volumes increased, reaching EUR 425 million in the first six months of 2015, against EUR 268 million in the same period of last year. The lending market share of Swedbank Latvia was 21% as of March 31, 2015 (22% as of December 31, 2014).
Net recoveries by Swedbank amounted to EUR 11 million (EUR 6 million in the first six months of 2014) driven by recoveries mainly from a few large commitments. Impaired loans amounted to EUR 138 million (EUR 154 million as of December 31, 2014). Credit quality has improved to such a level that impaired loans are now decreasing at a more moderate pace.
Deposit volumes slightly decreased by 2% from December 31, 2014. Swedbank Latvia's market share in deposits was 17% as of March, 31 2015.
''Although the uncertainties surrounding Greece's status in the eurozone persist and the economic downturn in Russia continues, the Latvian economy maintains moderate growth. The sentiment of households and businesses is comparatively strong and several indications point to a rise in investment activity and a growing demand for loans. This has allowed us to stabilize our lending portfolio. We see that lending volumes have also resumed growth thanks to the record-low interest rates. This unprecedented situation benefits borrowers while upsetting depositors. Like the majority of banks, Swedbank has chosen not to apply negative rates to deposits,'' the head of Swedbank in Latvia Maris Mancinskis points out.
Net interest income decreased by 10% compared with the first half-year 2014. Low market interest rates pressured deposit margins, the bank informs. Compared with the previous quarter, net interest income increased by 6%.
Net commissions increased by 3% compared with the first half-year 2014 driven by strong customer activity. Compared with the previous quarter, net commission income increased by 4%.
Total expenses decreased by 5% year-on-year, supported by lower expenses for premises and IT. Compared with the previous quarter, expenses decreased by 2%. The cost-income ratio increased to 0.40 (0.38 in the first six months of 2014).
For Swedbank Lithuania profit for the first six months of 2015 amounted to EUR 36.2 million (EUR 56.4 million in the first six months of 2014). The decrease was mainly due to external factors, e.g. low interest rates and effects related to euro introduction, Swedbank said in a statement.
"Despite external uncertainties, the country's macroeconomic situation remains stable, and we maintain our focus on meeting the financing needs of our customers. We are pleased with the growth of our lending portfolios, evident both in the private and in corporate area. Although market interest rates have continued to decrease, net interest income, which is our main source of income, remained stable in the second quarter compared with the previous quarter," said Dovile Grigiene, head of Swedbank Lithuania.
Lending volumes increased by 5% compared with 31 December 2014, driven by increased credit demand. The positive trend was seen in corporate lending and mortgages.
Deposit volumes remained broadly stable compared with 31 December 2014. The loan-to-deposit ratio was 86% (82% as of 31 December 2014).
Credit impairments amounted to EUR 4 million (EUR 7 million net recoveries in the first six months of 2014). Impairments were related to a few customers. Impaired loans amounted to EUR 118 million (EUR 128 million as of 31 December 2014). Credit quality has improved to such a level that impaired loans are now decreasing at a more moderate pace.
Net interest income decreased by 13% compared with the first half-year 2014. Low market interest rates pressured deposit margins.
Net commissions decreased by 1% compared with the first half-year 2014. Higher customer activity increased commissions related to cards, asset management and lending. Payment commissions decreased due to Lithuania's adoption of the euro.
Total expenses decreased by 8% compared with the first half-year 2014, driven in part by euro-related one-off costs one year ago. The cost-income ratio was at 0.48% (0.44 in the first six months of 2014).
Swedbank Lithuania will pay EUR 18 million in taxes to the state budget for the period January-June 2015.
Last year Europe's capital adequacy requirements (CRR/CRD IV) were clarified, which made it possible to further optimise the Group's capital structure. Swedbank's Baltic operations are very well capitalised after a long period of robust profitability. During the second quarter Swedbank therefore decided to take an extra dividend from the Estonian sub-group of EUR 400 million to the parent company. Since profits in Estonia are first taxed upon distribution, this generated an extra tax expense of EUR 100 million. Swedbank's normal dividend policy with respect to the Baltic operations is that around 60% of profits generated by the Baltic subsidiaries since 2014 will be distributed to the parent company, Swedbank AB. Swedbank is also reviewing the possibility to optimise the capital structure in the Latvian and Lithuanian subsidiaries. Distributions in Latvia and Lithuania do not produce similar tax effects, since company tax is paid on an ongoing basis.
Swedbank Estonia announced that its loss for the first six months of 2015 amounted to EUR 20.9 million versus a profit of EUR 80.3 million in the first six months of 2014.
Pre-tax profit for the first six months of 2015 amounted to EUR 91.9 million versus EUR 94.3 million in the first six months of 2014. The loss occurred due to EUR 100 million higher tax expenses from extra dividend. Income increased compared to the previous year while expenses decreased due to continuous focus on efficiency.
Lending volumes increased by 2% compared with 31 December 2014, driven by increased credit demand in the light of stable macroeconomic conditions in Estonia despite external uncertainties. The positive trend was seen in all major portfolios: corporate lending, leasing, consumer finance and mortgages. Swedbank has been able to strengthen its market position: in Estonia the bank's market share for lending was 39.1% as of 31 March 2015. On 31 December 2014 market share for lending was 38.7%.
Deposit volumes increased by 7% from 31 December 2014. Swedbank's market share in deposits was 44.6% as of 31 March 2015. On 31 December 2014 market share for deposits was 43.7%. The loan-to-deposit ratio was 98% (102% as of 31 December 2014).
Credit impairments amounted to EUR 0.6 million (EUR 3.8 million net recoveries in the first six months of 2014). Impaired loans amounted to EUR 132 million (EUR 138 million as of 31 December 2014). Credit quality has improved to such a level that impaired loans are now decreasing at a more moderate pace, Swedbank said.
